Growth Stocks
Although growth stock picks can be highly volatile, they can make good long-term investments. They may be well-known stars or quiet gems, but they do share one common attribute—they are growing at a higher-than-average rate within their industry, or within the market as a whole, and could keep growing for years or decades.
And keep in mind that we focus on growth stocks, which have a good long-term history and favourable prospects. We downplay momentum stocks that tend to attract many investors simply because they are moving faster than the market averages, but are liable to fall sharply when their momentum fades.
There’s room for growth stock investing in your portfolio, but make sure you follow our TSI Network three-part Successful Investor strategy for your overall portfolio:
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
Make better stock picks when you read this FREE Special Report, Canadian Growth Stocks: WestJet Stock, RioCan Stock and More.
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MART RESOURCES $1.19 (Toronto symbol MMT; TSINetwork Rating: Speculative) (403-270-1841; www.martresources.com; Shares outstanding: 356.6 million; Market cap: $449.3 million; Dividend yield: 16.8%) produces oil at its 50%-held Umusadege field in the Niger Delta region of southern Nigeria.
The company recently completed construction of a new central processing facility at the Umusadege field. This plant can process 35,000 barrels of oil a day, enough to handle the field’s current output of 10,140 barrels a day, in addition to all future production increases.
Meanwhile, the company is reporting steady cash flow and continues to pay quarterly dividends of $0.05 a share. The stock yields 16.8%.
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The company recently completed construction of a new central processing facility at the Umusadege field. This plant can process 35,000 barrels of oil a day, enough to handle the field’s current output of 10,140 barrels a day, in addition to all future production increases.
Meanwhile, the company is reporting steady cash flow and continues to pay quarterly dividends of $0.05 a share. The stock yields 16.8%.
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CHESAPEAKE ENERGY $27.30 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 665.5 million; Market cap: $18.1 billion; Dividend yield: 1.3%) is up 9% since August 19, when activist investor Carl Icahn revealed that he had increased his stake in the company to 9.98% from 8.98%.
Icahn has a long history of pushing companies to make changes that have increased shareholder value.
He first acquired a stake in Chesapeake in May 2012. Since then, he has successfully pressured the company to replace four of its eight board members with his nominees. Most recently, four of Chesapeake’s top executives left as part of an ongoing reorganization. That’s in addition to co-founder and former CEO Aubrey McClendon, who departed in April, and two senior vicepresidents who left in May.
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Icahn has a long history of pushing companies to make changes that have increased shareholder value.
He first acquired a stake in Chesapeake in May 2012. Since then, he has successfully pressured the company to replace four of its eight board members with his nominees. Most recently, four of Chesapeake’s top executives left as part of an ongoing reorganization. That’s in addition to co-founder and former CEO Aubrey McClendon, who departed in April, and two senior vicepresidents who left in May.
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CIMAREX ENERGY $91.50 (New York symbol XEC; TSINetwork Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 86.5 million; Market cap: $7.9 billion; Dividend yield: 0.6%) produces and explores for natural gas and oil. Gas makes up 49% of its output. Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas (50% of production); the Permian Basin of western Texas and southeastern New Mexico (47%); and the Texas Gulf Coast (3%).
In the three months ended June 30, 2013, Cimarex’s production averaged 686.8 million cubic feet of natural gas equivalent per day (including oil).
That’s up 16.4% from 590.1 million cubic feet a year earlier. Thanks to the higher production and increased oil and gas prices, Cimarex’s cash flow per share jumped 42.9%, to $4.00 from $2.80.
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In the three months ended June 30, 2013, Cimarex’s production averaged 686.8 million cubic feet of natural gas equivalent per day (including oil).
That’s up 16.4% from 590.1 million cubic feet a year earlier. Thanks to the higher production and increased oil and gas prices, Cimarex’s cash flow per share jumped 42.9%, to $4.00 from $2.80.
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DEVON ENERGY CORP. $59.82 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 406.0 million; Market cap: $23.9 billion; Dividend yield: 1.5%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 58% gas and 42% oil.
In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.
Devon is now further tightening its focus by selling its natural gas gathering and processing assets for $300 million to $500 million.
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In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.
Devon is now further tightening its focus by selling its natural gas gathering and processing assets for $300 million to $500 million.
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strong>AEROPOSTALE $10.08 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646- 485-5410; www.aeropostale.com; Shares outstanding: 78.5 million; Market cap: $798.2 million; No dividends paid) reported sales of $454.0 million in the three months ended August 3, 2013. That was down 6.4% from $485.3 million a year earlier. Same-store sales declined 15%.
The slow U.S. economy has increased the unemployment rate among teens, which has hurt sales at most teen-focused retailers. Aeropostale lost $0.34 a share in the latest quarter, compared to nil per share a year earlier.
The company now has a new product development team in place, which should let it better react to changes in teenage fashion trends. Aeropostale will likely be able to repeat its past success at attracting customers, but its sales may remain weak in the near term.
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The slow U.S. economy has increased the unemployment rate among teens, which has hurt sales at most teen-focused retailers. Aeropostale lost $0.34 a share in the latest quarter, compared to nil per share a year earlier.
The company now has a new product development team in place, which should let it better react to changes in teenage fashion trends. Aeropostale will likely be able to repeat its past success at attracting customers, but its sales may remain weak in the near term.
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COMPUTER MODELLING GROUP $24.00 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 38.5 million; Market cap: $943.5 million; Dividend yield: 3.0%) sells consulting services and software that help oil and gas producers use advanced recovery techniques to get more out of their existing wells. It has customers in over 50 countries and offices in Calgary, Houston, London, Caracas, Bogota, Kuala Lumpur and Dubai.
In the three months ended June 30, 2013, Computer Modelling’s revenue rose 10.0%, to $18.1 million from $16.5 million a year earlier. Software licence sales increased, as did consulting and professional services revenue. Earnings rose 16.3%, to $7.1 million from $6.1 million. Per-share earnings gained 18.8%, to $0.19 from $0.16, on fewer shares outstanding.
Computer Modelling holds cash of $63.1 million, or $1.66 a share, and has no debt. It spent $3.5 million, or a high 19.2% of its revenue, on research in the latest quarter.
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In the three months ended June 30, 2013, Computer Modelling’s revenue rose 10.0%, to $18.1 million from $16.5 million a year earlier. Software licence sales increased, as did consulting and professional services revenue. Earnings rose 16.3%, to $7.1 million from $6.1 million. Per-share earnings gained 18.8%, to $0.19 from $0.16, on fewer shares outstanding.
Computer Modelling holds cash of $63.1 million, or $1.66 a share, and has no debt. It spent $3.5 million, or a high 19.2% of its revenue, on research in the latest quarter.
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PASON SYSTEMS $21.70 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 82.1 million; Market cap: $1.8 billion; Dividend yield: 2.4%) rents equipment for monitoring and managing oil and gas rigs. It also sells communication technology, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas producers and drilling contractors throughout Canada, the U.S., Mexico, Argentina and Australia.
In the three months ended June 30, 2013, Pason’s revenue fell 2.1%, to $82.4 million from $84.1 million a year earlier. Less drilling in the U.S. and Canada offset strong international sales. Still, cash flow per share rose 5.1%, to $0.62 from $0.59. That’s because the company cut costs at its U.S. operations, which account for 71% of its revenue.
Pason holds cash of $195.4 million, or $2.38 a share, and has no debt.
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In the three months ended June 30, 2013, Pason’s revenue fell 2.1%, to $82.4 million from $84.1 million a year earlier. Less drilling in the U.S. and Canada offset strong international sales. Still, cash flow per share rose 5.1%, to $0.62 from $0.59. That’s because the company cut costs at its U.S. operations, which account for 71% of its revenue.
Pason holds cash of $195.4 million, or $2.38 a share, and has no debt.
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NISSAN MOTOR (ADR) $20.55 (Nasdaq symbol NSANY; TSINetwork Rating: Above Average) (310-771-3111; www.nissan-global.com; Shares outstanding: 2.3 billion; Market cap: $45.2 billion; No dividends paid) plans to make multiple models of self-driving vehicles by 2020.
The technology will include laser scanners, cameras and advanced artificial intelligence. The system is an extension of Nissan’s current Safety Shield technology, which monitors a 360-degree area around the vehicle, warns the driver of risks and takes action if necessary. The technology can also be integrated with a standard in-car navigation system, so the vehicle knows which turns to take to reach its destination.
The company believes it will only cost $1,000 to add self-driving technology to a luxury sedan. It hopes the system will cut the number of accidents and free up the driver’s time for more productive uses.
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The technology will include laser scanners, cameras and advanced artificial intelligence. The system is an extension of Nissan’s current Safety Shield technology, which monitors a 360-degree area around the vehicle, warns the driver of risks and takes action if necessary. The technology can also be integrated with a standard in-car navigation system, so the vehicle knows which turns to take to reach its destination.
The company believes it will only cost $1,000 to add self-driving technology to a luxury sedan. It hopes the system will cut the number of accidents and free up the driver’s time for more productive uses.
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ADOBE SYSTEMS $52.58 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 502.3 million; Market cap: $24.2 billion; No dividends paid) makes software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use its software to create print publications and web pages.
In the three months ended August 30, 2013, Adobe’s revenue fell 7.9%, to $995.1 million from $1.1 billion. That missed the consensus estimate of $1.01 billion.
Excluding one-time items, Adobe’s earnings fell 43.5% in the latest quarter, to $164.4 million, or $0.32 a share, from $291.2 million, or $0.58 a share, a year earlier. That’s because the company’s costs rose sharply as it transitions to selling its software as a subscription service instead of a one-time purchase. The latest earnings missed the consensus estimate of $0.34 a share.
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In the three months ended August 30, 2013, Adobe’s revenue fell 7.9%, to $995.1 million from $1.1 billion. That missed the consensus estimate of $1.01 billion.
Excluding one-time items, Adobe’s earnings fell 43.5% in the latest quarter, to $164.4 million, or $0.32 a share, from $291.2 million, or $0.58 a share, a year earlier. That’s because the company’s costs rose sharply as it transitions to selling its software as a subscription service instead of a one-time purchase. The latest earnings missed the consensus estimate of $0.34 a share.
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FAIR ISAAC CORP. $54.42 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 35.2 million; Market cap: $1.9 billion; Dividend yield: 0.2%) makes FICO Scores, the computer program that dominates the market for software that businesses use to evaluate customer creditworthiness. The company is also profiting by selling software that helps credit card issuers control fraud and analyze cardholders’ spending patterns.
In its fiscal 2013 third quarter, which ended June 30, 2013, Fair Isaac’s earnings per share before onetime items rose 9.6% from a year ago, to $0.80 from $0.73. Revenue gained 14.5%, to $183.8 million from $160.5 million.
Fair Isaac continues to spend around 9% of its revenue on research. That lets it keep producing innovative new products that help it stay ahead of its competitors.
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In its fiscal 2013 third quarter, which ended June 30, 2013, Fair Isaac’s earnings per share before onetime items rose 9.6% from a year ago, to $0.80 from $0.73. Revenue gained 14.5%, to $183.8 million from $160.5 million.
Fair Isaac continues to spend around 9% of its revenue on research. That lets it keep producing innovative new products that help it stay ahead of its competitors.
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